8 to 11 girls try this kind of approach on to see if it fits. If adults and peer group don't nip it in the bud it becomes a real problem. I remember my own kids starting to talk to me like muck - at first I did not know what to do - but quickly learnt to say "Don't talk to me like that" -
Good manners and consideration are taught. And need to be maintained throughout childhood.
As a family member watching this from outside it is nearly impossible to have an impact though. If possible develop a relationship based on, even if not spoken, "I won't accept this, this doesn't work with me" because you may be the adult who holds some chance of saving this child from a lifetime of unhappiness.
It only takes one adult who understands a child to save that child. Apparently (Alice Miller).

Oops, there's often trouble when girls are allowed to grow up too fast and I think age 10 is a turning point for many girls. They are wannabe teenagers and will try it on. As others have said, this needs to be nipped in the bud. It's not always easy for the parents. My 9 year old daughter has started puberty and her moods are like four seasons in one day!
Although I could strangle her some days, the basis for a really good person is there. She is polite, friendly, well behaved and with a strong sense of right and wrong. The type of kid you could take anywhere and always was, right from babyhood. We're proud of her but despite our love and encouragement, we feel her self-esteem just isn't high enough. I think like all things in life, a balance is best and your niece has an over inflated sense of self as this is what has been instilled in her. Your sister has been a bit of a daftie in her approach and is paying the price now. Reading Harry Potter to a 3 year old is all about your sister having her own issues and feeling the need to show off. Ditto with the designer clothes. Sorry DL, is that too harsh? x
This thread really reminds me of one of the girls in my daughter's class. My daughter and this girl used to get on so well but this girl has really changed in the space of a year, largely due to her vacuous, nouveau riche mother (it's not like me to bi.tch, much , but it's true!) and no longer has a civil word to say to my daughter. This girl wears all the latest trendy clothes and grows up in a house where anything goes (she was watching horror films as a little 'un) and lots of drinking goes on, largely because mother and older sister go out clubbing and getting pis.sed together!) She's got a superiority complex going on and when my daughter recently asked how her horseriding lessons were going, this girl replied "why bother asking, you could never afford it!" I've had to hold back when I see M. saying hello to this girl and get totally blanked in return. Of course M being M, she keeps trying to get this girl to like her again. It drives Mr Tarte and I mad!
Sorry folks, I haven't half rambled here . I guess what I'm trying to say is that it's a shame when kids are treated as mini adults, as they grow up way too fast. I'd be exasperated if I were you DL, but then parents not listening to teachers about their offspring has always been a bugbear of mine! Your sister isn't listening because to do that would be to admit that there's a problem, which would have to bring on change. This isn't easy to do so she's choosing to ignore common sense and blame everyone else. It's sad and does no-one any favours in the long run.
M will go to private school in August, as will her sisters when they turn 10 (as is the indy system here in Edinburgh) but Mr Tarte and I won't be putting up with any nonsense from any of them!
I hope things work out with your niece DL, and that this turns out to be a phase.

I teach in an independent school and if she behaved in this manner where I teach she would be pulled for it very quickly indeed as it is just not tolerated. Much more so than in the state schools I have taught, good manners and consideration for others are seen as paramount and she will be roundly brought to her senses very quickly I hope.

This sort of attitude needs to be nipped in the bud pretty darn quick! It will get worse if it's left to develop and at 16/17 she'll be unbearable both to her peers and her teachers. Strange, but girls seem to be frequently like this: both of my daughters have had one such pest in their class. The other pupils tended to reject the pest as she was seen to be immature, attention seeking and disruptive, talking when the teacher was and such like. I wonder how girls with this sort of attitude will survive in the world of work or the first time they get a rejection after an interview, fail their driving test, etc.
I can only commiserate, OP.